The EURUSD pair is trying to stage a recovery after a major sell-off over the last week. However, the bounce lacks momentum as the greenback is striving to stay afloat amid investors’ cautiousness in the global stock markets. The price can’t regain the 1.23 mark since last Thursday signaling the single currency so far fails to shake off its recent weakness.
Despite the mainly offered tone around the US dollar, the euro will hardly be able to resume its rally in the short term. The market focus is now shifting to the US inflation numbers due on Wednesday. The report will set further tone for the greenback across the board, and should the figures exceed expectations, the USD will resume its recovery from three-year highs, aided by another sell-off in the stock market, as strong CPI could reinforce investors' concerns over a more aggressive monetary policy tightening across the globe.
In the short-term, the euro needs to regain the psychological 1.23 threshold in order to avoid a more significant slide. The immediate upside goal is the 20-DMA in the 1.2330 area. However, should the USD attract buyers again, the pair risks to give up its modest gains and edge down to January 18 lows around the 1.22 level which will be broken if the US CPI numbers point to a rise in consumer prices.
By Helen Rush
Senior Analyst at Capital Markets